Tax hike on new cars opposed

MANILA, Philippines - Opposition Rep. Edcel Lagman of Albay expressed opposition yesterday to the Duterte administration’s plan to seek higher taxes on cars that would jack up vehicle prices.

He said the proposed increase in car taxes would particularly hurt middle- and upper-income earners.       

According to Lagman, the taxes will go up from two percent to five percent for automobiles with prices below P600,000; 20 percent for those selling for P600,000 to P1.1 million; 40 percent for those with prices ranging from P1.1 million to P2.1 million; and 60 percent for vehicles selling above P2.1 million.

“With the prices of automobiles becoming prohibitive, car users will be constrained to continue using their old environment-unfriendly vehicles (while) car distribution companies will suffer lower sales (resulting) in layoff of workers,” he said.        

The higher car tax is part of the administration’s tax reform package, which Finance Secretary Carlos Dominguez III submitted to the House of Representatives and the Senate last week.        

The so-called reform package “is anti-poor and anti-marginalized,” Lagman said.

“It taxes holiday pay, overtime pay, night shift differential pay, hazard pay and 13th month pay received by low-income earners; and repeals VAT (value added tax) exemption of people with disabilities and senior citizens,” he said.

It will also impose a P10 excise tax on lubricating oils and greases, waxes and petrolatum, nafta regular gasoline, leaded premium gasoline and aviation turbo jet fuel; and P6 on processed gas, denatured alcohol, kerosene, diesel, liquefied petroleum gas, asphalts and bunker fuel, Lagman said.

Lagman added the imposition of a P6-per-liter tax on diesel would result in higher fares and transport cost for consumer products, which in turn would translate into higher consumer prices.

“Since the burden of excise taxes on petroleum products cascades to the ultimate consumer or the general public, the brunt of the tax is borne by ordinary people who constitute the bulk of the consuming public who will not benefit from the tax package,” he stressed.

Deputy Speaker and Marikina Rep. Romero Quimbo, who chaired the committee on ways and means in the previous Congress, said the proposed tax reform package would also scrap the personal tax exemptions now being enjoyed by working spouses.

He said under the existing law, an employed spouse was getting a personal exemption of P50,000 plus P25,000 for each of a maximum of four dependents or a total of P150,000.

The other spouse, if she or he is employed, is entitled to another P50,000 in personal exemption, he said.

Workers and other individual taxpayers stand to lose all these exemptions plus the zero tax on their 13th-month pay, Christmas bonus, incentive and other benefits, Quimbo said.

However, Quimbo pointed out that the DOF was proposing that a gross income of P250,000 a year, or P20,833 a month, would be tax-free.

Quimbo estimated that despite the recommended tax-free amount of earnings, millions of workers in the private and public sectors would still pay income tax.

 “For instance, the lowest-paid teacher, who holds Salary Grade 11, receives a basic monthly salary of P19,077, plus a mid-year bonus and a 13th-month pay, for a total of P267,078 a year. They will obviously be subject to tax under the DOF tax reforms,” Quimbo said.

This means that some 700,000 public school teachers and all government personnel holding Salary Grade 11 and higher will pay income tax, he said.

Navotas Rep. Tobias Tiangco has proposed in a bill that monthly earnings of up to P30,000 or P360,000 a year be spared from taxation.

Speaker Pantaleon Alvarez has also said he was not amenable to the proposal to scrap the VAT exemption of senior citizens and disabled persons.